Macro Perspectives
Amonthep Chawla
East-West Center
& Nihon University Population Research
Institute
National Transfer Accounts
Macro Perspectives
► Micro
or survey data may not entirely
represent macroeconomic activities
► National accounts and other government
documents are needed to adjust results
estimated from micro-level data
► Aggregates National Transfer Accounts
come from National Accounts
► Need to understand the similarities and
differences between these two accounts
National Transfer Accounts
Outline
► I.
Understanding National Accounts
► II. Methods to Adjust National Accounts to
National Transfer Accounts
National Transfer Accounts
I. Understanding National Accounts
►
►
►
National accounts provide a complete and consistent
conceptual framework for measuring the economic activity
of a nation
Most countries compile national accounts following the
methodology of the United Nations System of National
Accounts (UNSNA) 1993; however, there exist differences
between SNA in each country and the UN guidelines
The System of National Accounts (SNA) consists of a
coherent, consistent and integrated set of macroeconomic
accounts, balance sheets and tables based on a set of
internationally agreed concepts, definitions, classifications
and accounting rules
National Transfer Accounts
Key Variable of the National Accounts:
Gross Domestic Product (GDP)
GDP can be measured using three approaches
► 1. Production approach
 GDP= gross value added (output-intermediate
consumption) +taxes-subsidies
► 2.
Final expenditure approach
 GDP=final consumption+gross capital
formation+exports-imports
► 3.
Income approach
 GDP=compensation of employees+taxessubsidies+gross operating surplus+gross mixed income
National Transfer Accounts
National vs. Domestic:
Gross National Income (GNI)
► GNI=GDP
+ compensation of employees
and property income from the ROW compensation of employees and property
income to the ROW
► GNI involves “primary income” or income
derived from factors of production
► Domestic current transfers are not included
(i.e., social contributions, social benefits,
taxes on income and other transfers)
National Transfer Accounts
Net National Income (NNI)
► NTA
is consistent with Net National Income
► NNI equals GNI – consumption of fixed
capital (depreciation)
► Using net operating surplus and net mixed
income rather than gross operating surplus
and gross mixed income
► Using net saving rather than gross saving
National Transfer Accounts
Institutions in SNA and NTA
► Institutional
units are units that are capable of
owning goods and assets, incurring liabilities and
engaging in economic activities and transactions
with other units in their own right
► SNA-5 institutions: non-financial corporations,
financial corporations, government units, including
social security funds, non-profit institutions serving
households (NPISHs) and households
► NTA: unit of analysis is at the individual level
National Transfer Accounts
II. Methods to Adjust National
Accounts to NTA
► The
first step is to allocate net indirect taxes
(indirect taxes less subsidies) to individuals to
measure income and consumption at “basic prices”
 NTA uses basic prices or prices before paying indirect
taxes and receiving subsidies
 SNA reports “market prices” or actual prices of
consumption and income
► The
second step is to estimate labor income and
asset income from national income
National Transfer Accounts
National Income Account
National Income
National Expenditure
Compensation of employees Wx
Consumption Cx
Operating surplus and mixed
income Ox
Saving S
•Mixed income
Less: net indirect taxes (indirect
taxes less subsidies) TGt
•Household operating surplus
(profits of imputed rent)
Less: net transfer received from
the rest of the world TROW
•Other private operating surplus
W  O  C  S  TG   ROW
x
x
NationalIncome
x
t
NationalExpenditure
Note: superscript x defines variables at market prices
National Transfer Accounts
Review: National Transfer Flow
Account Identity
► Inflows
► Outflows
 Labor Income
 Asset Income
 Transfer Inflows
 Consumption
 Saving
 Transfer Outflows
Y (a)  Y ( a)   ( a)  C ( a)  S ( a)   ( a)
l
a


Inflows
Outflows
C (a )  Y l (a )  Y a (a )  S (a )    (a)    (a)
Lifecycle Deficit
Asset-based Reallocations
Net Transfers
Age Reallocations
National Transfer Accounts
Net Indirect Taxes
► Indirect
taxes are taxes on production and imports
in SNA
► Taxes on production and imports consist of taxes
payable on goods and services when they are
produced, delivered, sold or transferred
► Business owners (owners of corporations and
unincorporated enterprises) may pay taxes, but
they can shift tax burden to consumers and
workers
► Tax incidences are difficult to measure
National Transfer Accounts
Effects of Indirect Taxes
► Indirect
taxes borne by consumers raise
prices on consumption
► Indirect taxes borne by workers reduce
wage
► Indirect taxes borne by business owners
reduce operating surplus and mixed income
National Transfer Accounts
Indirect Taxes Borne by Consumers
► Examples
are import taxes, sale taxes and VAT
► Consumption at basic prices is measured as
consumption at market prices less net indirect
tax on consumption, i.e.
C  C  TG
x
National Transfer Accounts
tc
Indirect Taxes Borne by Workers and
Business Owners
► Examples
are export taxes and taxes on financial
transactions
► Wages, operating surplus and mixed income at
basic prices can be measured as wages,
operating surplus and mixed income at market
prices plus net indirect tax on production, i.e.
W  W  TG
tw
O  O  TG
tk
x
x
National Transfer Accounts
Indirect Taxes, Japan, 2004 (bil yen)
Total
Consumption tax
Liquor tax
Tobacco tax
Gasoline tax
Petroleum gas tax
Aircraft fuel tax
Petroleum and coal tax
Exchange tax
Motor vehicle weight tax
Customs duties
Tonnage tax
Local road tax
Petroleum gas tax
Aircraft fuel tax
Motor vehicles weight tax
Special tonnage tax
Gasoline tax
Crude oil, etc. tax
Electric power source development tax
Other
Stamp duties
Securities transaction tax
National Transfer Accounts
37,591
18,637
3,102
1,700
4,094
26
164
897
0
1,400
1,529
17
579
26
30
699
21
1,321
82
697
496
2,121
0
Taxes Borne
by
Consum ers
Taxes Borne
by
Producers
Adjusting Consumption
► Public
Consumption
 Education
 Health
 Other public
consumption
NTA Consumption is lower by
indirect taxes on consumption.
Question: what types of
consumption that pay indirect
taxes? Need to understand tax
policy.
National Transfer Accounts
► Private





Consumption
Education
Health
Housing (imputed rent)
Durable
Other private
consumption
Adjusting Labor and Asset Income
► Labor
income consists of compensation of
employees (W) and labor’s share of mixed
income Ohl
Y W O
l
l
h
► Asset
income consists of operating surplus and
mixed income minus the labor’s share of mixed
income
Y  O O
a
National Transfer Accounts
l
h
Labor Income
► Compensation
of employees
► Labor’s share of mixed income
Indirect tax on labor income may allocate
proportionally between the above two types
of labor income
National Transfer Accounts
Asset Income
► Private
asset income
 Capital’s share of mixed income
 Household operating surplus
 Other private operating surplus of financial and
non-financial corporations
Which part of asset
 Private property income
income pay indirect
► Public
asset income
 Public property income
National Transfer Accounts
taxes? Tax incidence
depends on tax policy.
Aggregate Controls
Please fill in the white cells
Country
Currency
Unit of aggregate values
Year
Japan
yen
1,000,000,000
2004
Variable
Asset income
Capital income
Operating surplus, net
Operating surplus of corporations and NPISHs , net
Opearting surplus of households, net
Capital share of mixed income, net
Other taxes less subsidies on production
Property income, net
Property income, inflows
Property income, outflows
Interest, net
Inflows
Outflows
Interest outflows, households
Interest outflows, households to government
Distributed income of corporations, net
Inflows
Outflows
Reinvested earnings on DFI, net
Inflows
Outflows
Property income to insurance policyholders
Inflows
Outflows
Rent, Net
Inflows
Outflows
Saving, Net/Current external balance
Capital transfers, net
Capital
transfers, ransfer
inflows
ational
ccounts
Capital transfers, outflows
N
T
A
Year
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
Aggregate controls for asset
income and saving
Total
83,262.5
83,262.5
0.0
105,616.5
-105,616.5
Private
98,228.3
83,262.5
74,499.8
47,460
27,040
6,642
2,120.9
14,965.8
93,757.0
-78,791.2
12,913.6
65,362.5
-52,448.9
-6,494.9
0.0
1,100.5
12,481.2
-11,380.7
434.8
645.2
-210.4
-0.2
9,707.3
-9,707.5
517.1
5,560.8
-5,043.7
51,672.9
-4,839.6
4238.7
-9078.3
ROW
-9,508.1
0.0
Public
-5,457.7
0
0
-9,508.1
4,431.8
-13,939.9
-5,457.7
7,427.7
-12,885.4
1,664.4
-8,782.5
6762.5
-12558
-1,732.2
1,082.5
-2,814.7
-434.8
210.4
-645.2
0.0
0.0
0.0
-223.0
1,474.5
-1,697.5
-18,618.5
627.4
2116.6
-1489.2
631.7
631.7
0
0.0
0
0
0.2
0.2
0
-294.1
33.3
-327.4
-28207.1
4,326.0
8501.3
-4175.3
Aggregate Private Transfers
► Inter-household
households)
transfers (transfers between
 Inflows to one household may differ from outflows from
another household: net transfers in the economy are
not zero
 If ROW is included, inflows match outflows for
aggregate inter-household transfers
► Intra-household
household)
transfers (transfers within a
 Transfers received by one member equal transfers made
by another
 Aggregate intra-household transfers equal zero
National Transfer Accounts
Public Transfers
Inflows
► In-kind transfers
(public consumption)
► Cash transfers
 Social security benefits
 Other public cash
transfers
National Transfer Accounts
Outflows
► Personal income tax
► Corporate income tax
► Net indirect tax
► Social security tax
► Transfer surplus/deficit
Transfer Surplus/Deficit
► Balancing
item that insures that transfer outflows
and inflows are equal
► Relationship between transfer surplus/deficit and
public saving
 If taxes and grants exceed public transfer inflows,
transfer surplus and public asset income are saved
 if taxes and grants fall short of public transfer inflows,
transfer deficit must be financed out of asset income
with the residual saved
► public
saving is the sum of public transfer
surplus/deficit and public asset income
National Transfer Accounts
Public Transfers and Asset Flows, Japan,
2004 (billion yen)
Public Transfers
Net Public Transfers
0
Pubic Transfer Inflows
149,943
In-kind Transfers
89,468
Cash Transfers
60,475
Public Transfer Outflows
-149,943
Taxes and Grants
-127,193
1
Transfer Surplus(+)/Deficit(-)-Public Asset-based Flows
-22,749
Public Asset-based Reallocations
22,749
Asset Income
-5,458
Public Saving2
-28,207
1
2
Surplus/Deficit is equal to Public Transfer Outflows - Taxes and Grants.
Public Saving is equal to Transfer Surplus/Deficit + Asset Income .
National Transfer Accounts
Summary
► It
is important to be consistent with national
accounts while constructing NTA in order for
NTA to represent macroeconomic activities
► Unit of analysis of NTA is at the individual
level: individuals represent all five
institutions of national accounts
► Tax incidence of indirect taxes affect how to
measure basic prices of consumption, labor
income and asset income
National Transfer Accounts